Why should policy makers care about PPIs for services? Services - - PowerPoint PPT Presentation

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IMF | Statistics

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Why should policy makers care about PPIs for services?

• Services activities (ISIC 50-99) contributed 65% of global GDP in 2017
• Share of GDP from service activities showing steady, secular growth; particularly in

lower middle income countries

• Needed for accurate deflation of services production in national accounts
• Needed to identify services sector productivity

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IMF | Statistics

3 Luxembourg Lebanon Netherlands Israel Spain Denmark Iceland Guatemala Mexico Estonia Montenegro Honduras Namibia Croatia Sri Lanka Ireland Slovak Republic Bosnia and Herzegovina Peru Zambia Bangladesh Cameroon Lesotho Senegal Mozambique Kyrgyz Republic Armenia Algeria Uganda Sudan Kenya Uzbekistan Lao PDR Guyana Tanzania Mali Ethiopia Chad

20,0 30,0 40,0 50,0 60,0 70,0 80,0

Services Share of 2016 GDP

Source: World Bank World Development Indicators Database

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1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 30 35 40 45 50 55

Services Share of GDP

Low income countries Lower middle income countries

Source: World Bank World Development Indicators Database

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1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 30 35 40 45 50 55 60 65 70 75

Services Share of GDP

Low income countries Lower middle income countries High income countries

Source: World Bank World Development Indicators Database

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Deflation of services production in national accounts

• When PPIs for services are unavailable, CPIs often used in place
• CPI represents very different basket
• Excludes sales for export, includes imported services
• Excludes sales to businesses and government, for example:
• Warehousing
• Freight transportation
• Advertising sales
• Custom software development
• Cloud computing
• Commercial rents
• Price trends for services CPIs and services PPIs show persistent differences

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2 7 Q 1 2 7 Q 2 2 7 Q 3 2 7 M 1 2 8 Q 1 2 8 M 4 2 8 M 7 2 8 M 1 2 9 Q 1 2 9 M 4 2 9 M 7 2 9 M 1 2 1 Q 1 2 1 M 4 2 1 M 7 2 1 M 1 2 1 1 Q 1 2 1 1 M 4 2 1 1 M 7 2 1 1 M 1 2 1 2 Q 1 2 1 2 M 4 2 1 2 M 7 2 1 2 M 1 2 1 3 Q 1 2 1 3 M 4 2 1 3 M 7 2 1 3 M 1 2 1 4 Q 1 2 1 4 M 4 2 1 4 M 7 2 1 4 M 1 2 1 5 Q 1 2 1 5 M 4 2 1 5 M 7 2 1 5 M 1 2 1 6 Q 1 2 1 6 M 4 2 1 6 M 7 2 1 6 M 1 2 1 7 Q 1 2 1 7 M 4 2 1 7 M 7 2 1 7 M 1 2 1 8 Q 1

• 3,00%
• 2,00%
• 1,00%

0,00% 1,00% 2,00% 3,00% 4,00%

Euro Area HICP-Services vs. SPPI (annual percent change)

HICP - Services PPI - Services

Source: Eurostat

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1 9 9 1 9 9 / 9 1 9 9 1 / 5 1 9 9 2 1 9 9 2 / 9 1 9 9 3 / 5 1 9 9 4 1 9 9 4 / 9 1 9 9 5 / 5 1 9 9 6 1 9 9 6 / 9 1 9 9 7 / 5 1 9 9 8 1 9 9 8 / 9 1 9 9 9 / 5 2 2 / 9 2 1 / 5 2 2 2 2 / 9 2 3 / 5 2 4 2 4 / 9 2 5 / 5 2 6 2 6 / 9 2 7 / 5 2 8 2 8 / 9 2 9 / 5 2 1 2 1 / 9 2 1 1 / 5 2 1 2 2 1 2 / 9 2 1 3 / 5 2 1 4 2 1 4 / 9 2 1 5 / 5 2 1 6 2 1 6 / 9 2 1 7 / 5 2 1 8 2 1 8 / 9 2 1 9 / 5

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1 2 3 4 5 6

Japan Services PPI vs. Services CPI (annual percent change)

Services - CPI Services Less Imputed Rent - CPI CPI Services Less Imputed Rent

Source: Bank of Japan

Note: PPI in Japan is BtoB only

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Comparison of prices with nominal GDP 2007-2010

2 7 Q 1 2 7 Q 2 2 7 Q 3 2 7 Q 4 2 8 Q 1 2 8 Q 2 2 8 Q 3 2 8 Q 4 2 9 Q 1 2 9 Q 2 2 9 Q 3 2 9 Q 4 2 1 Q 1 2 1 Q 2 2 1 Q 3 2 1 Q 4

• 10,0
• 8,0
• 6,0
• 4,0
• 2,0

0,0 2,0 4,0 6,0

Japan (annual percent change)

CPI Services Services Less Imputed Rent - CPI 2 7 Q 1 2 7

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2 7 Q 3 2 7 Q 4 2 8 Q 1 2 8

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2 8 Q 3 2 8

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2 9 Q 1 2 9 Q 2 2 9 Q 3 2 9

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2 1 Q 1 2 1

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2 1 Q 3 2 1 Q 4 2 1 1 Q 1 2 1 1

• 4
• 1
• 10,0
• 8,0
• 6,0
• 4,0
• 2,0

0,0 2,0 4,0 6,0

Euro Area (annual percent change)

HICP - Services PPI Services Nominal GDP

Source: Eurostat, Bank of Japan

Note: PPI in Japan is BtoB only, Euro Area is BtoAll

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US Legal Services CPI vs. PPI (annual percent change)

CPI - Legal Services PPI-Legal Services

Source: U.S. Bureau of Labor Statistics

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IMF | Statistics

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Data for Decisions (D4D) Fund

• Multi-partner initiative to improve statistical capacity in low and low-middle

income countries

• Project started in 2018, scheduled to complete in 2023
• Includes plan to provide workshops and technical assistance missions on

PPIs for services https://www.imf.org/en/Capacity-Development/d4d-fund

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Data for Decisions (D4D) Fund

Services PPIs Improving business and consumer surveys; identifying non-survey data sources

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Data for Decisions (D4D) Fund

• 77 low and low middle income countries are IMF members
• 29 of these currently compile a PPI or WPI
• 9 of these have started development of PPIs for services

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Workplan for D4D project module on PPIs for services

FY20 (May 2019 – April 2020)

Workshop in Thailand (10/19) 2 Missions in Asia and Pacific Region

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Workplan for D4D project module on PPIs for services

FY21 (May 2020 – April 2021) Workshop in Sub-Saharan Africa 2 Missions in Sub-Saharan Africa Potential for repeat missions to Asia and Pacific Region countries

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Workplan for D4D project module on PPIs for services

Work will continue in FY22 and FY23

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Workshops

• Focus on assisting countries with selecting services activities for development
• Considering size, importance, complexity, cost
• Practical exercises to identify country-specific data
• Overview of stages of PPI compilation, highlighting aspects unique to services:
• Sampling
• Weighting
• Data collection
• Index calculation
• Analytical review

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Context for developing countries

Challenges

• Large informal sectors
• Insufficient source data
• Insufficient data collection and review resources
• Unsure about where to start

Opportunities

• Resourceful staff
• Chance to develop and improve over time

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Advice on SPPI development

• Typically start with transportation and telecommunications activities
• Prices may be available from administrative sources
• High industry concentration
• Pricing methods well developed
• Accommodation and tourism may also be part of early development
• For countries where foreign tourism is significant
• If domestically oriented, CPI may be sufficient
• More challenging sectors later in development
• Retail and wholesale trade
• Financial services

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Where Voorburg Group fits

• IMF will be utilizing the valuable resources developed by the Group
• Sector papers
• Telecom, warehousing, transportation, accommodation
• Developing countries are often interested in banking (FISIM)
• Revisiting the largest most significant services activities is helpful
• Guidance papers
• Bundling, alternative data, quality adjustment
• Presentations of countries sharing development experiences
• Strong interest in country and activity-specific materials
• Repository of questionnaires?
• Please share anything you think may be helpful!
• Encourage country participation in Group, where practical